Nortel boss calls for R&D tax breaks


29 Sep 2003

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The Irish Government should create specific tax breaks for indigenous and multinational companies that engage in research and development in the forthcoming budget, the head of Nortel Networks’ R&D operations in Galway Mike Conroy has said.

Speaking to siliconrepublic.com, the site leader of Nortel’s R&D operations in Galway said that while multinationals investing in R&D in Ireland sometimes get direct grant aid from IDA Ireland, such investment should be rewarded in financial terms if R&D is proven to have a direct benefit both indigenous and multinationals’ bottom lines. Conroy said that this is a view increasingly being held by the heads of overseas operations in Ireland that are pushing for newer responsibilities for their plants.

Nortel, which invests on average some 14pc of its revenues in research and development per annum, this year celebrates 30 years in Galway where it employs 220 people. The Galway operation, which began life as a manufacturing facility, has survived numerous cutbacks and changes throughout the Nortel Networks corporation. It is now a frontline R&D site for the company, developing advanced contact centre systems and the latest voice-over-IP technologies. The operation’s ability to transform itself from traditional manufacturing to a state-of-the-art R&D operation is regarded by other multinationals in Ireland as a template for survival.

According to Mike Conroy, who sits on the board of ICT Ireland and is involved in the Atlantic Technology Corridor project in Galway, investment in R&D needs to be incentivised through tax breaks if Ireland wants to move up the value chain in the technology world. “Innovation is key right now and many of the groundbreaking technologies developed at Nortel here in Galway were enabled through the help of local R&D companies including Storm Technologies and CyberNet and many others.”

Conroy continued: “The Government should follow the example of the world’s acknowledged R&D leaders, Canada and Israel, both of which are breaking new ground by implementing new tax breaks for R&D. The UK is beginning to move in this direction too,” he noted.

“Local R&D companies like Storm and CyberNet have proven critical to Nortel’s growth in Ireland and it is a shame that there are no incentives or tax breaks to encourage such companies to reach new heights. It is a question of Ireland gaining critical mass in terms of innovation. There is a rare opportunity for the country to take a leadership position in R&D. Across the entire ICT world, there is an ongoing debate about which geographies are the ones to watch.”

Conroy continued: “From an Ireland Inc perspective, the country is in the in middle league. It’s a good thing that we are well positioned from a geographical point of view, we find that we support can support 60pc of the customer base in North America. We’re well placed to provide 24 x 7 R&D. Cost competitiveness continues to be important, and it’s important to have supports within the broader political environment for R&D tax credits. The focus on investment so far for multinationals has been direct grant aid. However, there is a shift in the boardrooms of the world whereby corporation tax plays less of a role. Canada, Israel and the UK have begun implementing innovative tax mechanisms based on the level of R&D and profits declared. We feel strongly that this should be a stronger part of Irish Government policy.

“Another issue is that Ireland is not a strong player in terms of international sales and marketing and business development focus. This needs to change. You can be innovative and produce great products, but what needs to be strengthened is the ability to penetrate new markets globally. From an indigenous perspective, R&D needs to be incentivised and business development and sales and marketing needs to be improved,” Conroy warned.

Conroy also sits on the board of the Atlantic Technology Corridor project which aims to increase spending in the ICT sector in the region 50pc by 2006 as well as growing total jobs by 10pc every year. The group has brought significant broadband into the Galway/Shannon region, where some 16,000 people are employed in the ICT sector.

By John Kennedy